He Executive published this Tuesday the Law of Modernization of the Peruvian Pension Systemwhich was approved by the Congress in June.
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The regulation was published in the Official Gazette El Peruano and establishes the creation of the Peruvian Comprehensive Pension System, which incorporates the Pension Normalization Office (ONP) and the Private Pension System (Pension Fund Administrators).
The new system establishes a single system and incorporates measures such as the minimum pension of S/600the Compulsory membership from the age of 18 and the VAT pension, which will use 1% of purchases made by members of their respective funds.
The law does not allow new withdrawals from AFP funds. However, it does allow the repayment of a mortgage loan with the funds from the respective account.
Self-employed workers
The law establishes that for independent workers who receive fourth or fifth category income, a mandatory contribution rate will be applied. This rate will be applied gradually starting on the first January of the third year after the entry into force of this law. That year, a rate of 2% will be applied, which will be increased every two years until reaching a maximum of 5%.
The law establishes that the rate will be applied to the income received from each receipt for fees issued by the independent worker.
Retirement age
The law establishes that the retirement age is 65 for men and women. However, it indicates that “for the purposes of a progressive adjustment over time,” the Ministry of Economy must commission, every five years, an “entity of recognized prestige to review and evaluate the retirement age, proposing the corresponding modifications to the legislative bodies, if applicable, based on the conditions of longevity registered by the population, as well as the projected replacement rates for the contributory components.”
The first review will take place two years after the law promulgated on Tuesday comes into force.
It also provides that in order to access an early pension, an early orphanage pension or an early unemployment pension, it will be necessary to be 55 years old, without differentiating between men and women, as established by the previous system.
Four pillars
The new system, unlike the previous one, has four pillars: contributory, semi-contributory, non-contributory, and voluntary.
Non-contributory: This pillar is made up of people who receive assistance from the State without having been able to contribute throughout their life. The State will finance this pillar.
Semi-contributory: This pillar will be managed by the ONP and is aimed at those who, although they have partially contributed, require assistance to obtain a pension.
Contributory: It will allow the entry of new agents into the Pension System, which was only managed by the AFPs and the ONP. In this sense, banks, municipal savings banks, financial institutions, investment groups, among others, will be able to offer fund management services. Membership in this pillar is mandatory from the age of 18. At that time, you must choose between the private or public sector. If you were over 18 and were not affiliated, you can choose between the two options, or move to private administration on a mandatory basis.
Volunteer: This pillar will be managed by the companies of the Pension System. It complements the contributions necessary to achieve a minimum or special proportional pension in the semi-contributory pillar. In addition, it may increase the retirement and disability pensions provided in the contributory pillar.
1% of the VAT on purchases made by all members will be allocated to this pillar, money that will go directly to their fund.
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